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News Release

Singapore

JLL’s perspective: URA 3rd quarter 2014

Residential market continues to soften, office sector trends up


​​​​Singapore, 24 October 2014

RESIDENTIAL

Moderation in price decline but volumes weaken further

The -0.7 per cent decline in the private residential property price index is in line with the flash estimate figure of
-0.6 per cent, reflecting a mild easing in prices in 3Q14. This is attributed to the thin sales volume during the quarter and sellers trying to maintain their prices. Mild price softening was recorded across the non-landed residential segments with declines of –0.8 per cent for core central region (CCR), -0.4 per cent for rest of central region (RCR) and –0.3 per cent for the outside central region (OCR).

The landed property market price index declined more significantly by -1.8 per cent, due to reduced demand from a shrinking pool of buyers, constrained by the total debt servicing ratio (TDSR).

In 3Q14, developers sold 1,531 private homes, 43 per cent lower than 2Q14. This is lowest quarterly primary market sales volume since 4Q08. During the first 9 months on 2014, 5,940 private homes have been sold by developers. For the full year, we estimate that developers could sell about 8,000 private residential units, which will be well below the 14,948 units sold in 2013.


Sharp decline in OCR volume

Of the 1,531 units sold in the primary market in 3Q14, 738 (48 per cent) were in OCR, 656 (43 per cent) in RCR and 137 (9 per cent) in CCR. The 738 units sold in OCR were 56 per cent lower than in 2Q14 and represent the weakest quarterly volume since 4Q09, when the market was recovering from the global financial crisis. OCR primary market sales had never fallen below 1,000 units since then and averaged above 3,300 units per quarter in the year before TDSR was imposed. This shows how hard the OCR market has been hit by TDSR as it was previously thought to be a more resilient market segment.


Strong completed supply momentum continues while rents soften further

The private residential rental index fell by 0.8 per cent in 3Q14, continuing the softening in rents since 3Q13. Vacancy rate for the private residential market remained at 7.1 per cent during the quarter as sustained supply of completed units added to more homes being available for lease.

While the supply of residential units available for rent is increasing, growth in demand by tenants has stagnated. Tighter policy on hiring of expatriates has kept the number of employment passes issued at 176,600 in June 2014, a mere 0.9 per cent increase from the previous year.

4,559 new residential units were completed in 3Q14, maintaining the strong supply momentum from the 4,902 units completed in 2Q14. In the first three quarters of 2014, 13,575 units have been completed, surpassing the 13,150 new units that were completed for the whole of 2013. 2014 is likely to end with 17,000 to 18,000 units completed while the supply in each of the next two years is expected to be around 20,000 units or more. This will intensify competition in the leasing market and exacerbate the softening in rentals.

In 3Q14, new projects completed in popular leasing locations include Altez (280 units), 76 Shenton (202 units), Waterscape (200 units), Flamingo Valley (393 units), The Meyerise (239 units), The Interweave (169 units), Riviera 38 (102 units), Nathan Suites (65 units) and Buckley Classique (64 units)

 

OFFICE

Rents continue rising on the back of demand growth and tighter supply

Islandwide absorption increased from 22,000 sqm in the previous quarter to 50,000 sqm in 3Q14 on the back of increased leasing demand. There has been some pick-up in office leasing activity but mainly from smaller space takers. Without much growth in demand from the finance sector, most of the demand is now from the business services sector.

In 3Q14, islandwide supply shrank by 47,000 sqm due to stock withdrawal. Year-to-date, supply has shrunk 33,000 sqm cumulatively while absorption has increased to 78,000 sqm. This has resulted in overall vacancy dipping to 8.4 per cent in 3Q14 from 10 per cent in the beginning of the year.

The tighter supply and lower vacancy in the office property market has kept rents buoyant as seen in the 2.6 per cent rise in the rental index for office space in central region. The office rental index has been trending upwards since 1Q13 and is expected to continue rising into 2015.

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